Latest / The Series A Show with Fexingo: Early-Stage Funding, Pitch Decks, and Startup Milestones / Why Startups Are Benchmarking Against Public Comps Pre-Series A
Transcript
- Lucas: If a startup's Series A pitch deck opens with a page comparing its own price to sales multiple to Palantir and Coinbase, do you laugh them out of the room or do you lean in? Luna: I've literally seen that slide in three decks this quarter. And two of them closed their rounds. Lucas: Right. So this is becoming a real pattern — early-stage startups using public company comps to anchor their pre-money valuation. I'm not talking about later-stage growth rounds where it's standard. I mean seed-stage and pre-Series A companies, with maybe a million in ARR, putting up a chart that says 'Trading at 15x revenue vs. Palantir at 25x.' Luna: And the argument is basically: we're cheaper than the public comp, therefore we're a bargain. It's a framing that plays on what VCs already see in their public portfolios. Lucas: Exactly. And with public tech stocks having a strong mid-2026 — take Palantir up 3.7% in the last five days, Coinbase up 5.5%, NVIDIA up 4.8% — a lot of these names are hitting fresh highs. So the comps look attractive. But there's a real risk of false equivalence. Luna: Define false equivalence here. Because I think some VCs genuinely buy the argument. Lucas: The risk is that a pre-revenue or very early revenue startup isn't comparable to a Palantir that's been around for two decades with government contracts and a proven business model. The public comps are pricing in institutional trust, liquidity, and scale. A seed-stage company has none of that. So using the same multiple implies a risk profile that just doesn't match. Luna: But isn't the counterargument that if you're growing faster than the comp, the multiple should actually be higher, not lower? I've heard founders say 'We're growing 300% year-over-year, Palantir grows 20%, so our 15x is actually conservative.' Lucas: That's the growth at a discount pitch, and it works sometimes. But what I've noticed in the decks that actually convert is that they don't just slap a comp chart on page three. They do the work of showing which specific public companies are most analogous — usually ones in a similar sub-sector, with similar gross margins or unit economics. Luna: So you're saying the ones that succeed are the ones that cherry-pick the right comps, not just any hot tech stock. Lucas: Exactly. I saw a pitch from a fintech startup — they compared themselves to a handful of fintech names in the ARKK portfolio, not to the whole portfolio. They used the ETF as a shorthand for 'these are our eventual peers', but they showed that their own metrics on customer acquisition cost and lifetime value were actually better than the median public fintech company. Luna: That's clever. And it's a way to use the public market data without pretending they're already a public company. Lucas: And the data is so accessible now. Any founder can pull up a stock's price to sales ratio on their phone. The question is whether that data makes them more disciplined or more delusional. Luna: I've seen both. I've seen a founder say 'Look, Coinbase trades at 8x revenue, we're at 5x, so we're undervalued.' But Coinbase has a hundred million users and a balance sheet. This startup had five thousand users. Lucas: Right. And when VCs push back, the best founders don't get defensive — they say 'Okay, help me understand which comp you'd use instead.' And that's a sign of maturity. Luna: So is this a trend that's here to stay? Or is it a function of a bull market in tech stocks? Lucas: Probably both. But I think it's deeper than just market conditions. There's a growing expectation that even early-stage founders should understand the public market landscape. VCs want to know that you can think about your company as a public entity eventually. And using comps is a way of showing that. Luna: There's also the Greylock angle — they just capped their new fund at one point five billion, saying they could have raised more but wanted to stay disciplined. That signals to the market that bigger isn't always better. And I think that message trickles down to startups: don't raise at an inflated valuation just because you can. Lucas: That's a really good connection. Greylock's move says 'We're not going to chase the mega-fund frenzy.' And for a startup, using public comps to justify a smaller, more realistic round — rather than a blowout round — can actually build credibility. Luna: Yeah. And it avoids the down-round later. If you raise at a 30x revenue multiple as a seed-stage company and then two years later you're growing slower, you're in trouble. Lucas: So the smart use of public comps is as a sanity check, not a sales pitch. If your comp analysis shows you're above the median for your stage, you might want to reconsider your ask. If it shows you're below, you might have room to negotiate up — but only if you can defend the comparison. Luna: And we should say, this kind of analysis is something our listeners are doing themselves. And if these conversations are useful for what you're building or running, that's exactly why we keep the show free and ad-free. Lucas: It's a deliberate choice. No ads, no sponsors, no pitch for a premium feed. If you find value in the episodes and want to support that independence, there's a link — it's buy me a coffee dot com slash fexingo. No pressure, just a way to keep the lights on. Luna: Exactly. And it means we can talk about things like public comps without worrying about a sponsor's take. So back to the trend — I think we'll see more founders using this approach, especially as tools like Carta and PitchBook add public market data layers. Lucas: For sure. And the ones who do it well will stand out. So if you're a founder preparing your Series A deck, spend an hour pulling up the price to sales ratios of the five most comparable public companies. See where you'd land. It might change your target number. Luna: Or it might give you a better story when a VC asks 'How did you arrive at that valuation?' Lucas: Exactly. And that story — backed by real public data — is worth more than any gut feel.